Interim
Joint Committee on State Government

Minutes
of the<MeetNo1>2nd Meeting

of
the 2008 Interim

<MeetMDY1>September 24, 2008

The<MeetNo2>second meeting of the Interim Joint
Committee on State Government was held on<Day>Wednesday,<MeetMDY2>September
24, 2008, at<MeetTime>1:00 PM, in<Room>Room 154 of the Capitol Annex. Senator
Damon Thayer, Co-chair, called the meeting to order, and the secretary called
the roll.

Discussion of storm water fees was first on the agenda.
Senator Thayer said he represents two unincorporated cities in northern
Kentucky (Ryland Heights and Fairview in Kenton County) that are required to pay
storm water fees—sometimes referred to as a “rain tax”—without receiving the
services that other, more suburban areas receive. He went on to say that he introduced
a bill in the 2008 regular session (SB 229) to exempt persons in areas not
served by a sanitary system from the storm water fees charged by that system. The
legislation generated some controversy, and he promised those on both sides an
opportunity to discuss the issue with the State Government Committee.

Mayor Miller said that he and Mr. Cole are appearing today
in order to seek justice for the residents of Ryland Heights, who feel that the
“rain tax” is being unfairly imposed on them. Mr. Cole read a prepared
statement explaining the city’s position that it should not be subject to the
fees, based on the fact that the city does not own or operate a municipal separate
storm sewer (MS4) system. He noted that the city has been seeking exemption
since 2003. In summary, he said that Sanitation District No. 1 contends that ditches
alongside the city’s state and county roads are considered storm water systems.
Neither Mark Mitchell of the EPA nor Johnny Gonzales of the Kentucky Department
of Water could produce paperwork in which the EPA stated that the ditch lines
are or are not considered storm water drains. Ryland Heights is a sixth class
city with a population of approximately 800. Its residents are not hooked up to
a storm sewer system but are paying the same fees as those in the large cities
who actually receive services in return for their money. The relief that Ryland
Heights is seeking is that either the Division of Water should redraw the
boundaries of the storm water service area to exclude Ryland Heights, or that
legislation should be passed in 2009 to exempt the city’s residents from paying
the fees.

Mayor Parks said that the city of Fairview had never signed
an agreement with Sanitation District No. 1 and does not have any storm sewer
drains. He referred to a quarterly bill of $231.99 in storm water fees that had
been received by a small church in Fairview and stressed that it is a hardship for
Fairview’s citizens—many of whom are elderly—to pay the fees, particularly when
no storm sewer services are received in return. He showed the Committee a small
leaflet, “Three Steps to Cleaner Water,” and said the city was told that their
payments are used to fund this educational material, even though the city
already sends out this type of literature.

Mayor Miller noted that Ryland Heights had originally signed
an agreement under threat of being fined approximately $25,000. He said the
city felt it had no recourse but to comply, but with the option of opting out
or being exempted at a later date. Mayor Parks said he has evidence that
residents of Fairview who refused or were unable to pay the fee have been
threatened with having their water service shut off, though this has been
denied by Mr. Eger. He contended that another Fairview resident was threatened
with having a lien placed on his property. He said he appreciates being heard
today and hopes that Senator Thayer’s legislation will again be considered.

The next speakers were Jeff Eger, General Manager of
Sanitation District No. 1, and Jack Bender, the District’s outside counsel
from the firm of Greenebaum Doll & McDonald. They provided the Committee with
copies of Mr. Bender’s February 2008 conference presentation entitled “Storm
Water Planning and Enforcement.”

By way of background, Mr. Eger explained that Sanitation
District No. 1 is a special district chartered under KRS Chapter 220. He went
on to say that in 1994 the statute was amended to allow all local governments
in northern Kentucky to turn over their sanitary sewer systems to the District,
which all did except the city of Florence. In 1998, the local governments asked
the General Assembly to amend Chapter 220 to allow the Sanitation District to
take over responsibility for the storm water systems throughout northern
Kentucky. As the District was implementing the takeover of ownership and
maintenance, the EPA promulgated the Phase II regulations and named all three
counties and all of the local governments in northern Kentucky, with the
exception of Walton, as having to comply with the unfunded federal mandate to
develop a storm water Phase II program. Sanitation District No. 1 does not own
any storm sewer system but does own the sanitary sewage systems, both separate
and combined, in the river city.

Mr. Bender discussed storm water planning and enforcement in
general, noting that the requirements for storm water control that are being
imposed on municipalities in Kentucky are growing and evolving. He went on to
say that Kentucky has approximately 100 Phase II communities and two Phase I
communities—Louisville and Lexington—that are subject to EPA storm water
program requirements. The ultimate goal of these MS4 programs is to require
municipalities to implement best management practices. The goal of the best
management practices is to ensure that storm water runoff coming from urban
areas through the MS4 systems—which can include road ditches, retention basins,
and culverts—meets stringent in-stream water quality standards. The trend
across the country today is that the requirements imposed under the MS4
programs will become more and more stringent. All Phase I and Phase II MS4
communities are required to implement a comprehensive storm water quality
management program. Cities have no choice but to implement these programs
throughout their jurisdictional area and then find the means to fund them.

Mr. Bender said that there will always be people who believe
they are utilizing less of a service than someone else. He went on to say that
part of the problem with respect to the fee systems is how to differentiate—how
to establish who benefits most from a construction permit program in one part
of a county that improves water quality there, if that is an area where more
construction takes place. There is some unfairness in this system, but
municipalities need the flexibility to comply with the unfunded mandates of
these programs and apply the programs across industrial, commercial,
residential, and even rural areas as required by EPA.

Senator Thayer commented on the randomness of the compliance
area boundaries and questioned how they were decided. Mr. Eger said that could
be answered better by the Energy and Environment Cabinet but that he believes
the boundaries were based on EPA guideline standards of population density. He
said the boundaries were drawn according to watersheds, so that all of the
waters inside the boundaries flow within the affected populated area. He then
reviewed PowerPoint slides showing maps of the northern Kentucky storm water
permit compliance area, watersheds, and designated storm water outfalls, plus relevant
aerial and land photos.

Mr. Eger noted that the sanitation districts have recently
negotiated a consent decree, which is very unique, that employs a
comprehensive, watershed-based approach. He went on to say that in the northern
Kentucky regional Phase II program there are more than 8,000 storm water
outfalls which the District is required to monitor on a regular basis—under the
KPDES (Kentucky Pollutant Discharge Elimination System) permit—and that the
storm water outfalls are well outside the sanitary sewer areas. He explained
that an outfall is an area where a storm water system is discharging into a
culvert, stream, creek, or pond.

Senator Thayer asked Mr. Eger to comment on the fees that
are being charged to persons living in unincorporated areas that do not receive
services from the sanitary sewer system. Mr. Eger said it is his responsibility
to implement the program according to the established boundaries and that the
law requires him to charge an equal, level fee throughout the service area. He
added that construction oversight is also the District’s responsibility. Mr.
Eger explained that the residential fee is the same for everyone in the service
area—about $4.12/month. The nonresidential fee is a factor of every 2,600
square feet of impervious areas such as roof space, driveways, and parking
lots. Senator Thayer asked Mr. Eger whether it is his opinion that the District
cannot voluntarily exempt areas that do not receive storm water service. Mr.
Eger said he does not believe they can be exempted but said, too, that he is also
not sure that the District is not providing them a service. He added that
although Fairview has challenged whether it has an obligation, its residents do
reside in the service area.

Representative Harmon asked about the fee structure relative
to roads and driveways, for example, with pervious rather than impervious
surfaces. Mr. Eger said that nonresidential customers implementing such best
practices can apply for water quantity or water quality credits. In certain
instances they might also be eligible for potential grant funding from the
District.

Representative Henley asked to whom fees collected by the
District are being expended, and for what purpose. Mr. Eger said those funds
are used for improvement of the storm water infrastructure in northern
Kentucky. Representative Henley asked whether the District would have to pay if
the Transportation Cabinet or a county billed the District for maintenance of
roadside ditches within the service area. Mr. Eger said no—that the ditches are
not the responsibility of the District, that the Transportation Cabinet has its
own permit to comply with, and that the District does not receive any money
from the Transportation Cabinet.

Representative Webb-Edgington asked whether state law or
regulation would allow an exemption for churches or schools. Mr. Bender said
that the regulations would not exempt them from the program requirements within
an MS4 area. He said that any facility—whether state, federal, or a church—is
required to comply. The issue of whether or not a church or somebody else would
be exempt from the storm water fee is strictly a local government issue.
Responding to another question from Representative Webb-Edgington, he said that
the definition of “municipal separate storm sewer system” includes road ditches
and culverts and not just traditional underground storm sewers. He explained that
storm water might fall in Ft. Wright but end up in Covington, for example. For
that reason, the District is charged with managing the storm water. He added
that it is difficult for one municipality to manage the storm water coming from
another municipality, whether coming from a ditch, creek, or a pipe system.

Representative Rollins asked whether the District would
consider funding a proposal from a county government for an improvement that
would prevent creek erosion. Mr. Eger said that the issue is complicated. He
went on to say that when the Sanitation District became the regional storm
water utility in 1998, as it began mapping the entire storm water system in
northern Kentucky, the unfunded mandates came down from EPA to require the
District to develop programs for public education and involvement, illicit discharge
detection and elimination, construction management, and pollution prevention
(good housekeeping). The District had to develop and is now implementing a
program for all of the municipalities, including the three county governments.
Funds collected are used for implementation of that program. Under an
interlocal agreement with each local government, the District agreed to fund—up
to 50 percent—any upgrade of the storm water systems until the District assumed
ownership. The District is now in the process of revising the interlocal
agreement and by this time next year should have full ownership responsibility
of the storm water system. When finalized, the District will implement the
necessary controls, funded entirely by the storm water fees, to remedy situations
such as creek erosion.

Representative Rollins asked whether the District works with
city and county governments as they develop regulations to control storm water.
Mr. Eger said yes—that the District is also working with planning and zoning agencies
to revise rules and regulations for subdivisions and commercial developments.
The District also has the ability to implement its own regulations relating to
detention. From the audience, Mayor Parks said that Fairview officials have
asked the District what the city should do in order to be relieved of the fees
but that the District has not given the city any direction. Mr. Eger pointed
out that granting Ryland Heights or Fairview an exemption may not exempt them
from the federal requirement to implement the Phase II program. He went on to
say that the District’s agreement with Ryland Heights is to implement the
program on the city’s behalf. If nonsanitary customers were to be exempted from
the fee, the interlocal agreement says that if the District cannot charge the
fee to implement the program, the local government would then be responsible
unless released from compliance with the Phase II EPA regulations through an
agreement with the Kentucky Division of Water

Representative Stumbo asked whether the statute allows
latitude to distinguish between older residences and those established after
land development led to a problem with storm water runoff. He said it seems
there should be equity involved in levying the fees—for example, charge a
higher fee for the post-development households and exempt the older households.
Mr. Eger said that would not be allowed under the statute. He pointed out that
it is not always development that causes impairment. It could be the result of
bad septic systems, agricultural runoff, animal pollution, etc. Representative
Stumbo noted that the Sanitation District was created because northern Kentucky
was a high development area. He said it seems to him that commercial developers
should bear more responsibility because, technically, they created the
situation. He asked whether other states allow a tiering of fees for households
based on age of the residence—adding that this idea might be worth exploring.
Mr. Eger said he is not aware of any. He went on to say that the District uses
GIS imaging system mapping to determine impervious areas. To do it for each
residence would be very costly, so the decision was to charge all households
the same fee of $4.12, which is within the national average. A recent national
study by the engineering firm Black & Veatch indicates that storm water
fees range from 70 cents/house to $70.00/house per month. Mr. Eger also noted
that, for the most part, the impaired streams in the District’s service area
are in rural areas.

Representative Wayne said that in the past he has introduced
legislation several times to permit local governments to impose impact fees on
new development, and each time the home builders and realtors lobbied to defeat
the legislation. He said he believes this type of legislation would be a
partial remedy, because any new residential or commercial development would
then be required by the developer to pay to the District a certain amount of
up-front money. That would, in turn, keep fees lower for existing homeowners
and businesses. Mr. Eger said that the District charges a “capacity connection”
fee for new development and that this fee has increased by 50 percent since
1994. He said this is, in essence, a kind of impact fee.

Representative Fischer asked what percentage of the storm
water fees are derived from areas not served by storm sewers. Mr. Eger said he
believes it is about two or three percent of the annual fee received from the
nonsanitary sewer customers. Representative Fischer said, then, that if those
areas were exempt from the fees, it would be necessary to raise other customers’
fees by that same percentage. Mr. Eger said that is correct.

Senator Thayer thanked Mr. Eger and Mr. Bender. The next
speaker was Sandy Gruzesky, Director of the Division of Water, Energy and
Environment Cabinet. Ms. Gruzesky provided the Committee with a 3-page handout entitled
“Population for Storm Water Entities as Defined by the 2000 Census” [Source: Federal
Register]. It lists the Kentucky communities identified by the federal
government that are required to be covered under the Phase II storm water
program.

Ms. Gruzesky gave a PowerPoint presentation entitled “Storm
Water MS4 Permitting Issues.” She noted that Phase II of the program went into
effect in 2003 and Phase I in 1992. She spoke at length on the following
topics: history of the storm water program; purpose of storm water regulation;
impervious cover; watershed issues; storm water permits; definition of MS4 systems;
MS4 storm water categories; northern Kentucky impaired rivers/streams/lakes;
minimum controls for Phase II storm water programs; timeline for Phase II MS4
permit reissuance; and the Lexington-Fayette MS4 program and consent decree. (A
copy of Ms. Gruzesky’s presentation is on file with LRC’s State Government
Committee staff.)

Ms. Gruzesky explained that the storm water fees are funding
the following activities required of Sanitation District No. 1: public
education and outreach; public involvement and participation; control of
construction storm water runoff and illicit discharge, including inspection and
enforcement; post-construction storm water management; and pollution
prevention.

Representative Webb-Edgington asked about the quality of
water in urban areas compared to less developed areas of the state where there
are straight lines running into streams. Ms. Gruzesky said that in parts of the
state where straight pipes are an issue—particularly eastern Kentucky—waters
are also impaired. She said that urban storm water involves a different kind of
pollution but that there is impairment for a variety of reasons statewide.
Representative Webb-Edgington asked whether there are any taxes or fees, other
than for enforcement, that are imposed on people in areas that run straight
pipes. Ms. Gruzesky said she is not aware of any.

Representative Henley asked whether he should contact the
Division of Water when he receives a complaint about septic system runoff that
cannot be addressed by the local health department. Ms. Gruzesky said yes—that
the Division receives that type of calls frequently and will send an inspector
to investigate and follow up. Representative Henley asked whether MS4 systems
are responsible for post-construction management of pipes and ditches, for example.
Ms. Gruzesky said yes. She said that sedimentation structures occasionally must
be cleaned out in order to remain effective. Representative Henley asked
whether communities could submit a bill for cleanup if a road ditch maintained
by a county or the state becomes full of sediment. Ms. Gruzesky said that the
state of Kentucky has its own permit and is required to do the cleanup in
urbanized areas for state-owned roads. Representative Henley said it seems,
then, that there is a duplication of services and that fees should be reduced
for the small unincorporated cities that do not operate a storm water system,
since all of their infrastructure is already being maintained by other parties
that pay for the maintenance. Ms. Gruzesky pointed out that the storm water is
coming from private property. She said the Transportation Cabinet will clean
out the ditches but that the material in the ditches came from parking lots and
other impervious areas.

Representative Higdon said that everyone agrees on the need
for clean water and the other goals of the Clean Water Act. He disagreed with
the “one size fits all” approach taken by the sanitation district and suggested
looking for a solution whereby the folks in the small cities without storm
water systems would be charged lesser fees than those in the larger urban
areas. Discussion concluded, and Senator Thayer thanked all the speakers.

Discussion of the 2009 Kentucky Employees Health Plan (KEHP)
was next on the agenda. Guest speakers from the Personnel Cabinet were Tim
Longmeyer, Deputy Secretary; Fred Nelson, Commissioner of the Department of
Employee Insurance; and Joe Cowles, General Counsel for the Department of
Employee Insurance. The meeting materials included the Cabinet’s “Benefits
Selection Guide”; copies of Mr. Longmeyer’s and Mr. Nelson’s PowerPoint
presentation, “Briefing on 2009 Rates and Benefits”; and a letter to the
General Assembly from Crystal Pryor, the Cabinet’s Chief of Legislative
Affairs.

Mr. Longmeyer discussed the challenges faced by the Cabinet
when developing the health plan for 2009. He said that health plan inflation
continues. The 2008 employee contributions were artificially lowered, which
created a shortfall in overall trust funds that could be used in developing the
new plan year benefits. The benefits had not changed in years, and the highly
used plans lacked diversity. About 98 percent of participants chose two of the
four plans that were offered. This created consumer complacency, and most were
not really aware of their benefits or whether they were enrolled in a plan that
best met their needs. There was no meaningful wellness plan, though not for
lack of trying. Many wellness efforts had been made, but there was little
utilization. There was also little utilization of the HRA (health reimbursement
account) plan—otherwise known a consumer-driven plan—which many companies,
corporate entities, and states are moving toward in order to increase the level
of consumer awareness.

Mr. Longmeyer said that those challenges were met with
certain principles in mind. The goal was to provide uniform coverage across the
Commonwealth; encourage wellness and healthy lifestyles; provide preventive
care at little or no cost; improve chronic disease care; educate members about
plans appropriate to their health needs; provide plan alternatives accessible to
retirees; provide a quality PPO option; provide an improved subsidy for family
and dependent coverage; and provide plans with unlimited lifetime maximums. He
said that due to the great effort of the Department of Employee Insurance—and after
many meetings with vendors, experts, stakeholders, employees, the Group Health
Insurance Board, and the best practices Committee chaired by Secretary Jonathan
Miller—he believes those challenges have been met and the guiding principles
have been maintained.

Mr. Nelson reviewed details of the four plans being offered
for 2009: Commonwealth Standard PPO, Commonwealth Capitol Choice, Commonwealth
Optimum PPO, and Commonwealth Maximum Choice. He discussed the new Capitol
Choice plan, which is a “hybrid” plan that combines features of a modern,
consumer-driven plan with features of a traditional PPO plan. He went on to
explain that the plan features a single co-payment of $100 for all in-network
hospitalizations. Another unique feature is a $500 up-front benefit allowance
per family member, which would provide 100 percent coverage for certain
in-network services before payment of the deductible.

Mr. Nelson went on to explain that the new Commonwealth
Optimum PPO plan merges features of the 2008 Commonwealth Enhanced and
Commonwealth Premier plans. Commonwealth Maximum Choice is a consumer-driven
plan that includes a health reimbursement account (HRA) and will offer the same
benefits as 2008’s Commonwealth Select plan. The Commonwealth Standard PPO plan
will offer the same benefits as the 2008 Commonwealth Essential plan. Mr.
Nelson pointed out that 40 percent of KEHP members have annual pharmacy and medical
expenses of $1,000 or less. Commonwealth Maximum Choice, which includes $1,000
in an HRA account for single coverage, would totally cover costs for members
choosing single coverage under that plan. Twenty-eight percent of plan members
have annual medical and pharmacy expenses of $500 or less; the new Capitol
Choice hybrid plan would be ideal for them.

Mr. Nelson said that some pharmacy co-payments will increase
slightly in 2009. He noted that at the beginning of 2006, the member cost share
for overall pharmacy benefits was 19 percent, and KEHP paid 81 percent. Since
2006, because of medical and pharmacy inflation, the plan has been picking up a
higher percentage of that cost. The 2009 adjustment in pharmacy co-pays returns
members to the 19 percent share that they were paying at the beginning of 2006.
Mr. Nelson also briefly touched on the pharmacy mail-order benefit, the
specialty drug management program, the addition of some medications to the step
therapy and prior authorization programs, the 75-prescription reduced co-pay
benefit, the VirginHealth Miles walking program, and the improved disease
management program. He noted that KEHP currently has a little more than 150,000
employee and retiree members; the addition of dependents raises the total membership
to approximately 260,000.

Mr. Nelson reviewed the non-smoker premium rates for 2009. He
said that the rate-setting process faced daunting challenges because of the
overall budget situation and medical inflation, and because the previous
administration had used $50 million from the trust fund to buy down premiums.
He said that, with the exception of the Optimum PPO plan, the other three plans
being offered will have a zero employee contribution for single coverage. The
single coverage monthly premium for the Optimum PPO plan will be only $5 more
than the premium for 2008’s Commonwealth Premier. Premiums for comparable
dependent coverage will increase by five percent or less, compared to an
increase of six percent for dependent coverage in 2008. Concluding his
presentation, Mr. Nelson said that the 2008 premium surcharge for smokers is
about $16 for single coverage, or $32 for dependent coverage; the 2009
surcharge will increase to about $21 for single coverage, or $42 for dependent
coverage.

Representative Bell, citing personal experience, expressed
dissatisfaction with the difficult process for obtaining KEHP approval to cover
certain prescribed medications in lieu of generic or alternative drugs. He said
he and a lot of his constituents feel that the current policy is not working.
Mr. Nelson said that generally the plan follows a doctor’s recommendation,
although prior authorization and step therapy programs may require an
individual to first substitute a generic drug. Representative Bell said he
understands that. He added that his doctor submitted the required information
to get his prescription approved but that it was a fruitless effort. Mr. Nelson
said he believes that in most situations the pharmacy benefit manager will
agree to what a doctor prescribes if he can justify its use. He said the
Department would be happy to assist anyone who is having a problem in this
regard, and Mr. Longmeyer said that they will follow up with Representative
Bell.

Senator Thayer acknowledged Personnel Cabinet staffer
Charles Wells in the audience and advised the Committee that Mr. Wells is a
designated contact person to help members of the General Assembly who have
questions about the health plan.

Representative Pullin commended the Cabinet for its hard
work in developing the health plan. She asked what can be done to help persons
who believe they have correctly enrolled on line, only to find out after open
enrollment ends that they did not get enrolled. Mr. Nelson said that this year,
for the first time in many years, there will be a mandatory active enrollment.
He went on to say that the Department is aware of the potential for problems
and is committed to being as flexible and liberal as possible. Grace periods will
be allowed in order to assure that people get enrolled. After the first of the
year, it will probably be necessary for employees to file a grievance if they
failed to complete the enrollment process, but it is the Department’s goal to
be liberal in granting the grievances, which has not necessarily been the case
in the past. Representative Pullin asked whether the Department will notify
employees who have neglected to enroll. Mr. Nelson said that reports will be
generated to current members who did not enroll online, and their names and
social security numbers will be sent to the insurance coordinators for agencies
and school systems so that they can contact those persons and assist them with
enrollment. Mr. Longmeyer said that the Cabinet is sending out letters and
e-mails to employees and will try to be as liberal as possible in administering
open enrollment.

Senator Carroll said he thinks the Cabinet has done an
excellent job. He suggested that they consider having an automatic “default
enrollment” for employees who are currently in the health plan but fail to
enroll for 2009. Mr. Nelson said that they have considered that but that it
will not be possible under the new computer system KHRIS (Kentucky Human
Resource Information System) that goes into effect January 1. Senator Carroll
said that default paper enrollment perhaps could be completed by insurance
coordinators for employees who neglect to enroll or respond when notified that
they are not enrolled. Mr. Nelson said that they will give some thought to that
idea.

Representative Stacy asked how the amount of the smoker
surcharge is determined. Mr. Longmeyer said that there is a limitation of up to
20 percent of overall premium, according to HIPPA (Health Insurance Portability
and Accountability Act) regulation. He went on to say that 14 percent of
members currently report that they smoke, while it is known that the actual
number of smokers in the Commonwealth is closer to 28 or 30 percent. It is
apparent that quite a few are not reporting that they smoke. The surcharge is
an important deterrent and encourages people to enter smoking cessation
programs. The 2009 surcharge reflects an increase of 25 percent, which
represents an overall increase of about 33 since the surcharge was first put in
place a few years ago. Kentucky is one of only about a half dozen states that
have a smoking surcharge. The 2009 $42 smoker surcharge for dependent coverage
is believed to be the highest in the nation. The goal was to increase it in
such a way as not to encourage people to falsely open enroll but still serve as
an incentive for smoking cessation.

Representative Firkins also complimented the Cabinet. He
said that he had not been able to get approval for a medication because of the
step therapy requirements and had finally agreed to use the drug okayed by the
pharmacy benefit manager. He encouraged the Cabinet to look into this problem
and suggested it may be more prevalent than thought. Mr. Nelson said they will
be glad to intercede on behalf of plan members who are experiencing problems.

Representative Riner asked whether there are incentives for
people to answer the smoker question honestly. Mr. Longmeyer said the main
incentive is that giving a false answer is fraud. He went on to say that there
has not been an effort to prosecute so far. Instead, the 2009 plan will include
an option for smokers who quit or who complete a smoking session program to
qualify for the nonsmoker rate during the plan year and not just at open
enrollment. The Cabinet is also looking at more aggressive methods such as
potential prosecution or requiring affidavits but hopes that the option to
change smoker status during the plan year will encourage people to get involved
in the smoking cessation program.

Representative Graham said he hopes the Department will emphasize
in its publicity that the HRA plan is still being offered and that the unused
funds can be rolled over from one plan year to the next. Mr. Nelson noted that
the HRA and its rollover benefit are discussed in the “Benefits Selection
Guide.” Subsequent discussion touched on the October benefit fairs and the
90-day prescription mail-order benefit.

Representative Cherry asked the amount of the employer
contribution for 2009 for employees who waive coverage. Mr. Longmeyer said it
will be $175—the same as 2008.

The health insurance discussion concluded and Senator Thayer
thanked the speakers. He then read the subcommittee report for the Task Force
on Elections, Constitutional Amendments, and Intergovernmental Affairs, which
met on September 23. The report was approved without objection, upon motion by
Representative Firkins.